SA tops for investors in Africa despite slide

CAPE TOWN — SA continued to be the most attractive investment destination in Africa but its status has continued to slide due to a slightly weaker business environment and a faltering growth outlook, Rand Merchant Bank has concluded.

The bank’s Where to Invest in Africa 2015-16 report, launched yesterday, ranks Africa’s 54 countries in terms of attractiveness to investors.

Countries are rated on the basis of their gross domestic product at purchasing power parity taken together with forecast economic growth rates and their operating environments. SA’s global ranking by RMB has slipped to 41 from 33 last year.

The report noted a “seismic shift” over the past nine years in foreign investor perceptions of Africa, which accounted for 4.4% of global foreign direct investment flows last year.

The inflows have nearly doubled in this period.

It cautions that in a ranking of the investment appeal of 183 countries, Africa was still a relatively poor performer despite the positive developments in the investment climate in recent years that has generated superior returns relative to most emerging market economies.

Egypt jumped four places to recapture the number two spot from Nigeria, followed by Morocco, Ghana and Nigeria. Also in the top 10 were Ethiopia (6), Tunisia (7), Algeria (8), Tanzania (9) and Kenya (10).

“Nigeria’s descent to number five is attributed to a combination of local deterrents and its relative economic underperformance over the last year,” it noted. “We are encouraged by the peaceful transition of power and continue to believe in the country’s long-term economic viability based on the sheer size of its economy and the prospect of a demographic dividend.”

Egypt’s attractiveness lay in the size of its domestic market, its relatively low unit labour costs and the rapid uptake of technology in the country. Morocco overtook Ghana as foreign investors were attracted by the integration of value chains in the economy and the collaboration between big firms and small- and medium-sized businesses. Ethiopa’s position also improved because of its stable economic environment, strong investment guarantees, natural resources and programmes to develop skilled labour.

Tunisia fell two positions because of the struggling tourism industry and prevalence of terrorism.